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DEBT PRIORITIZATION PROBLEM: PAY CHINA FIRST? — Senior Democrats took note of this exchange between Bloomberg TV’s Peter Cook and House Speaker John Boehner as an example of how politically untenable the idea of debt prioritization really is. COOK: “Why is this legislation a good idea and what does it tell us about the possibility you’re going to see that kind of confrontation?” … BOEHNER: “Well our goal here is to not default on our debt. Our goal here is to get ourselves on the sustainable path from a fiscal standpoint. I think doing a debt prioritization bill makes it clear to our bondholders that we’re going to meet our obligations."

COOK: “Doesn't it mean, as Democrats have suggested, that you're basically choosing to pay China before you pay U.S. troops?” BOEHNER: “Listen. Those who have loaned us money, like in any other proceeding, if you will, court proceeding, the bond holders usually get paid first. Same thing here.” COOK: “And you’re not worried about the politics of this?” BOEHNER: “No. Not at all. I just think it is another tool that we can use to help impress upon the administration, if it comes to the point where they don’t have enough money to pay all the bills, here is some order that we think is sound.”

IMAGINE if this scenario were to actually play out: It’s late summer or early fall (see WP story lower down for timing) and the debt ceiling is about to be breached. Republicans demand significant spending cuts in return for a debt ceiling hike and Democrats refuse saying the GOP is holding the full faith and credit of the U.S. hostage to a narrow political agenda. Republicans argue they supported a bill that would prevent technical default. Democrats respond: “Oh, so you think we should pay the Chinese before our troops?” Tough spot to be in.

MORE BOEHNER — The House Speaker told Bloomberg he would “probably not” not support the Internet sales tax bill: “Listen, I just think that moving this bill where you've got 50 different sales-tax codes, it's a mess out there. And what you're doing is you're going to make it much more difficult for online retailers to be able to comply.”

AEI REPORT PUSH BACK — Hamilton Place Strategies’ Tony Fratto emails regarding the AEI study arguing Dodd-Frank was hurting community banks and forcing them to merger: “I know it's great SEO for these guys to get ‘TBTF’ in their press releases, etc. ... but this is a real stretch. However sympathetic we are with the regulatory burden on community banks, for AEI to assert as its No. 1 "Key Finding" that consolidation or mergers of small banks would result in greater concentration of assets in big banks is a compete non-sequitor.

“If regional or community banks merge, for whatever reason, so do their assets. In fact, the combined entity is probably in a better position to compete with the large banks. In fact, there's some good recent evidence already that small banks are in fact competing quite well": http://reut.rs/13v8Gzp

DODD-FRANK DERIVATIVES BILLS MOVE THROUGH COMMITTEE — A little birdie emails: “Secretary [Jack] Lew sent that letter urging opposition to all the derivatives bills the committee marked up today. Those six bills passed: 52-0; 59-0; 59-0; 50-10; 53-6; and 48-11.”

REACT — Public Citizen’s Bart Naylor: “Hensarling committee approved 9 bills to reopen the casino to Wall Street. But ranking member [Maxine] Waters and heroic, eloquent Rep. Stephen Lynch signaled that [Democrats] won't be allowed to support a Faustian bargain with Wall Street without scathing rebuke. The vote counts look bad but the rhetoric will reverberate to a more sensible Senate.”

U.S. CHAMBER’s Jess Sharp: “One day after the Treasury Department announced its general opposition to even reasonable changes to the derivatives section of Dodd-Frank that enjoyed strong bipartisan support last year, Democrats and Republicans in Congress came together, set politics aside, and took important bipartisan steps to help non-financial, Main Street companies hedge their risk, grow their businesses, and create jobs.

DOW CLOSES OVER 15K — LATimes’ Andrew Tangel: “Another day, another milestone on Wall Street. The red-hot Dow Jones industrial average barreled past 15,000 to close Tuesday at its highest point in history. … The latest surge has been marked by extreme caution, with small investors largely unwilling to take on excessive risk.

The rally has been fueled by sectors regarded as defensive: utilities, healthcare and consumer staples. … The records have come on growing hope that the global economy is on the mend and that the chance of the U.S. economy slipping back into recession is dimming. … By lowering interest rates, the Fed and other central banks have made investing in bonds less attractive, luring investors into riskier assets such as stocks.” http://lat.ms/ZFVVia

BORROWING PICKS UP — WSJ’s Neil Shah: “America's credit crunch is easing. For the past six years, consumers and businesses have struggled to borrow money, but slowly, things are getting easier. Large U.S. companies are taking advantage of low interest rates to borrow record amounts. … Banks are opening the spigots for commercial and industrial firms, and loans grew at an 11 percent annualized rate in the first quarter of this year, the sixth double-digit percentage increase in seven quarters, Federal Reserve data show.

“… Residential lending began edging up last year, and even people with bad credit can get a loan to buy a car these days. In all, some $713 billion in credit flowed to U.S. households and nonfinancial businesses last year, double 2011's $336 billion, according to the Fed. That is still a fraction of the $2.2 trillion in credit that lifted American consumers and businesses in 2007.” http://on.wsj.com/18sMoBA

THIS MORNING ON POLITICO PRO FINANCE – Zachary Warmbrodt and MJ Lee on the divide among House Democrats over making changes to Dodd-Frank derivatives provisions … To learn more about Pro's subscriber-only coverage – and to get Morning Money every day before 6 a.m. – please contact Pro Services at (703) 341-4600 or info@politicopro.com.

GOOD WEDNESDAY MORNING — Talk about a bad day. Former Detroit Lions wide receiver Titus Young got arrested twice on Tuesday, once for suspected DUI and again for hopping over a tow yard fence to try and get his car back. http://usat.ly/16fE5tC. As always, send your tips and comments: bwhite@politico.com; and follow on Twitter: @morningmoneyben and @POLITICOPro.

DRIVING THE DAY — President Barack Obama this afternoon meets with electric utility CEOs at the Energy Department and meets with Treasury Secretary Jack Lew in the Oval Office. … Senate Joint Economic Committee at 2:00 p.m. has second day of hearings on the economic impact of immigration reform. … CFPB has a field hearing at 6:00 p.m. in Miami, Fla. on student loan borrowers. … Ira Sohn conference in NYC draws some of the biggest hedge fund names to offer investment ideas that often don’t really pan out (see below). … Obama dines this evening with House Democratic leadership

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Need more Tax coverage? POLITICO Pro Tax is perfect for those who need a deeper dive on tax policy and regulatory affairs in Washington. POLITICO Pro Tax is delivered by 6 a.m. to help policy professionals get a jump on the day. In addition to delivering an earlier version of Morning Tax, Pro provides minute-to-minute coverage of the cross section of tax policy and regulation in Washington. For more information, call Pro Services at (703) 341-4600 or email info@politicopro.com.

POLITICS BLAST: SANFORD WINS IN SOUTH CAROLINA — POLITICO’s Alex Isenstadt: “South Carolinians may not love former Gov. Mark Sanford. They may still have a bad taste in their mouths after his governorship. They may even wonder whether they can entirely trust him. But in the end, they decided he was as good as they were going to get. Sanford completed his return from the political graveyard … easily dispatching Democrat Elizabeth Colbert Busch in a deep red district that Mitt Romney won by nearly 20 percentage points. … Sanford found a path to victory by turning the race into a referendum on the national Democratic Party instead of himself.

“He put his political gifts to work, wooing skeptical voters in a relentless game of retail politics. And he had the advantage of facing a political newcomer whose inexperience at times showed. In the end, the nail biter that late polls hinted at never materialized: Sanford crushed Colbert Busch, 54 to 45 percent. A turning point in the race came two weeks ago, when Sanford held a mock debate with a cardboard cut-out of House Minority Leader Nancy Pelosi, implying that the California Democrat … was a stand-in for his Democratic opponent.” http://bit.ly/12c6VH0

MORE ON IMMIGRATION COST — From Business Forward: “The starting point for any fiscal analysis should be ‘compared to what?’ … Whether or not we reform our immigration system, the 11 million undocumented immigrants who are already here are working, paying billions of dollars in taxes and consuming public benefits like Medicaid-funded emergency healthcare. Mass deportation of these immigrants would be a costly, infeasible undertaking — a 2010 Center for American Progress report estimates that such a step would cost about $285 billion over five years, and that’s before factoring in the economic impact of losing millions of workers.

“With deportation not a viable option, policymakers focused on the bottom line should be asking how legalization would change the fiscal costs and benefits caused by immigrants — not just adding up the costs of public services immigrants will use in the future. In budget parlance, the costs of immigration reform should be evaluated against a ‘baseline’ of continuing the status quo. In the absence of reform, our current system would continue to deteriorate. Many of the costs imposed by undocumented immigrants (most significantly emergency healthcare) will continue to rise.” http://bit.ly/10FhPko

HANDICAPPING INTERNET TAX BILL IN THE HOUSE — Guggenheim’s Chris Kreuger: “We are raising our odds to 40 percent from 30 percent that an online sales tax bill will become law by the end of the year, though continue to see the bill failing to clear the House. The Senate vote — while impressive — was not as large a margin as the previous 74 vote margin during the Senate Budget vote-a-rama (that vote was nonbinding). There remains strong opposition to the bill from leading anti-tax conservative advocates, which is the primary roadblock in the U.S. House and why we remain below 50 percent for passage.”

DIMON ARGUES TO KEEP TOP JOBS — WSJ’s Dan Fitzpatrick and Joann S. Lublin: “James Dimon, the head of JPMorgan Chase … told a group of investors this week that he wants to remain chairman and chief executive of the nation's largest bank, saying ‘this is what I enjoy.’ … The comments at a private meeting Monday marked one of Mr. Dimon's most direct responses to the shareholder uprising that threatens to strip him of one of his two roles. At the company's May 21 shareholder meeting, investors will cast a nonbinding vote on a proposal recommending a split of the chairman and CEO duties. If the split proposal succeeds, it would be a rebuke of Mr. Dimon's leadership …

“Mr. Dimon told the investors who met with him at JPMorgan Chase headquarters Monday, including Fidelity Investments, that he would like to keep both jobs but that the ultimate decision belongs to the board. Mr. Dimon said he can't see himself doing anything else but running the nation's largest bank. ‘Why do you keep doing it?’ one investor asked during the meeting, according to people who were there. Mr. Dimon said he learned when he left Citigroup in the 1990s that he missed the action and camaraderie that banking offered, and he isn't sure what else he would do.” http://on.wsj.com/12eY1r5

TOP HEDGE FUND MANAGERS OFFER BUM TIPS — FT’s Dan McCrum and Arash Massoudi in New York: "Hedge fund manager Bill Ackman's top tip was JC Penney, but the stock has since fallen in value by 37 percent. Advice from the gurus of Wall Street may be rather less valuable than their fans would like to believe. Investors who bought on the basis of top tips from one of New York’s most celebrated hedge fund conferences last year spectacularly failed to beat the market. The Ira Sohn Investment conference … brings together the leading lights of the hedge fund community to share market insights as a way of raising money for cancer research. But a Financial Times analysis of last year’s tips shows decidedly mixed results.

“An investor who followed every top idea from the 12 speakers last year would have made 19 percent, less than the 22 percent gain available from a passive index fund tracking the US stock market. Many of the ideas have proved woefully miscued, including some from the most high-profile managers who will return to the stage on Wednesday: David Einhorn of Greenlight Capital and Bill Ackman of Pershing Square.

The two best performers were the rather less well known Larry Robbins of Glenview Capital, and Philippe Laffont of Coatue Management, neither of whom will be speaking again this year." http://on.ft.com/16fwM57

U.S. MAY NO HIT DEBT LIMIT TILL OCTOBER — WP’s By Lori Montgomery and Zachary A. Goldfarb: “After four years of trillion-dollar deficits, the red ink is receding rapidly in Washington, easing pressure on policymakers but shattering hopes for a summertime budget deal. … The sunnier outlook means that President Obama will be able to pay the nation’s bills for months without seeking additional borrowing authority from Congress — probably until Oct. 1, according to independent forecasts. That might seem like good news, but it is unraveling GOP plans to force a budget deal before Congress takes its August break.

“Instead, the fiscal fight appears certain to bleed into the fall, when policymakers will face another multi-pronged crisis that pairs the need for a higher debt limit and the fresh risk of default with the threat of a full-scale government shutdown, which is also looming Oct. 1. In the meantime, Republicans face a listless summer, with little appetite for compromise but no leverage to shape an agreement. Without that leverage, House Budget Committee Chairman Paul Ryan (R-Wis.) said Tuesday, there is no point in opening formal budget negotiations between the House and the Senate” http://wapo.st/12c8Nj8

ALSO FOR YOUR RADAR –

MYTHS ABOUT KEYNESIAN ECONOMICS — Fiscal Times’ Mark Thoma: “Myth1: “Keynesians do not care enough about long-run economic problems: This has it backwards. Conservatives who oppose Keynesian economics are not concerned enough about short-run economic problems, particularly unemployment, and failing to address our short-run problems can bring long-run harm. Prolonged recessions, for example, cause people to permanently exit the labor force and this lowers our long-run growth potential. Keynesians care very much about the long run.” http://bit.ly/16VHv4J

LARRY FINK: MANDATORY RETIREMENT SAVINGS? — FORTUNE’s Katie Benner: “BlackRock Inc. Chief Executive Larry Fink said during a speech today that longer life spans and underfunded retirement plans are the defining challenge of our age, and went so far as to recommend that the U.S. consider making retirement savings mandatory. Fink acknowledged that retirement under-funding is not a new issue, but times have changed and the problem has become more pressing.”

“‘We're at a point now where the interest rate cycle makes it very difficult [for investors to save],’ he said, during remarks delivered to a group of NYU Stern Business School students. ‘If you can no longer buy a 30-year bond with a 7 percent yield, how will investors achieve the necessary savings outcome?’ … While the BlackRock (BLK) chief often speaks on retirement issues, he has never before suggested mandatory savings (perhaps something similar to what has already been enacted in Chile and Australia).” Read the full speech: http://bit.ly/15D0jWI

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